BT ready for UK PM Johnson's fiber broadband challenge

LONDON (Reuters) - BT is ready to play its part in achieving Prime Minister Boris Johnson’s plan to roll out full-fiber broadband across Britain, but said it needed it to make a fair return on the 30 billion pounds ($36.3 billion) the plan would cost the industry.

“We welcome the government’s ambition for full-fiber broadband across the country and we are confident we will see further steps to stimulate investment,” Chief Executive Philip Jansen said on Friday.

“We are ready to play our part to accelerate the pace of roll-out, in a manner that will benefit both the country and our shareholders, and we are engaging with the government and (regulator) Ofcom.”

Johnson said Britain had to roll-out full-fiber broadband to all homes and businesses to boost the economy in his campaign to become prime minister and after taking office last month.

He said a government target for complete full-fiber coverage by 2033 was “laughably unambitious”.

BT, Britain’s biggest broadband and mobile operator, is rolling out fiber to 4 million premises by March 2021, and plans another 15 million by the mid-2020s if the government and regulator makes it worth its while.

Jansen said BT would have to “re-prioritise capex”, and could increase borrowing and possibly cut its dividend.

“But if it made economic sense, and it is a fair balanced risk-reward equations, then our shareholders would be more than happy for us to make the decision,” he said.

The CEO said extending the plan to Britain’s 32 million homes and businesses by 2025 would be a major feat of engineering that would require significant investment, planning and also manpower.

BT would need another 30,000 engineers on top of the 5,000 already laying fiber to 20,000 premises a week, he said.

But, the government needed to take decisive action to allow BT to make a fair return, mandate that customers switch to the ultrafast service and give telecom firms the same permission to dig up roads and access locations as other utilities.

“If we can do that, then I know BT can go both faster and further than our current fiber build ambitions,” Jansen told reporters.

BT’s network, which it runs at arm’s length, is also used by providers such as Sky, TalkTalk and Vodafone.

Shares in BT, which have lost 60% of their value since February 2016, were down around 4%, their lowest in around seven and a half years, following its first-quarter results on Friday.

The company reported a 1% fall in adjusted revenue to 5.63 billion pounds ($6.82 billion) and adjusted core earnings to 1.96 billion pounds, both slightly ahead of market expectations.

But analysts said it missed forecasts in its consumer division and had relied on a contribution from “other”, such as the reversal of bonus accruals.

“We are concerned that BT will experience more competition in both consumer and wholesale segments, which coupled with the risk of higher FTTP (fiber to the premises) capex keeps us at Sell,” Deutsche Bank said.

CLEAR RETURN

CFO Simon Lowth said Ofcom had deemed that 15% was a fair return on earlier “fiber to the cabinet” investment, and that was a clear benchmark on the returns needed to drive “fiber to the premises”.

“Fiber to the cabinet” uses existing copper wires for the final connection into customers’ homes, whereas “fiber to the premises” is the gold standard, offering speeds of up to 1 gigabit per second.

Chris Watson, global head of TMC at law firm CMS, said: “Whilst telecoms companies like BT will be keen to accelerate the government’s ambitions for full-fiber broadband, the cost of rolling out FTTP and supporting infrastructure will need to be tamed if the UK is going to come close to achieving this.”

He said new legislation and regulatory reforms for full-fiber to drive investment and competition were needed and the switchover from copper to FTTP infrastructure must be accelerated by industry coordination with Ofcom.